Question Details

(Solution) - Truman Industries is a vertically integrated firm with several d

Brief item decscription

Solution download

Item details:

Truman Industries is a vertically integrated firm with several divisions that operate as decentralized profit centers. Truman?s Systems Division manufactures scientific instruments and uses the products of two of Truman?s other divisions. The Board Division manufactures printed circuit boards (PCBs). One PCB model is made exclusively for the Systems Division using proprietary designs, while less complex models are sold in outside markets. The products of the Transistor Division are sold in a well-developed competitive market; however, one transistor model is also used by the Systems Division. The costs per unit of the products used by the Systems Division are as follows:

The Board Division sells its commercial product at full cost plus a 34 percent markup and believes the proprietary board made for the Systems Division would sell for $12.25 per unit on the open market. The market price of the transistor used by the Systems Division is $3.40 per unit.

1. What is the minimum transfer price for the Transistor Division? What is the maximum transfer price of the transistor for the Systems Division?
2. Assume the Systems Division is able to purchase a large quantity of transistors from an outside source at $2.90 per unit. Further assume that the Transistor Division has excess capacity. Can the Transistor Division meet this price?
3. The Board and Systems divisions have negotiated a transfer price of $11 per printed circuit board. Discuss the impact this transfer price will have on each division.


About this question:

This question was answered on: Jul 11, 2017

PRICE: $15 (18.37 KB)

Buy this answer for only: $15

Pay using PayPal (No PayPal account Required) or your credit card. All your purchases are securely protected by PayPal.

Need a similar solution fast, written anew from scratch? Place your own custom order

We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

Order Now